Did Warren Buffett Consider Acquiring Kellogg, Heinz?

At Berkshire Hathaway's annual shareholder meeting on Saturday, Warren Buffett said he recently walked away from a $22 billion dollar acquisition . So, what company was it? Taking into consideration Berkshire Hathaway's previous acquisitions, he would likely have paid a 10%-30% premium to the market price. This means that the target Buffett considered likely had a market price between approximately $17 billion and $20 billion. Within this range, some companies that stand out are:

Kellogg K, producer and marketer of cereal and other packaged foods, is trading at around $50.50, closer to its 52-week low of $48.10 than its 52-week high of $57.70. The company's stock experienced a decline of approximately 5% late last month after reducing guidance. The food producer trades at a price to earnings ratio of 14.91, lower than comparable companies General Mills GIS, which has a P/E of 16.41, and Kraft Foods KFT, which has a P/E of 19.72. These differences in P/E ratios do not appear to be explainable by differences in capital structure. Kellogg pays a healthy dividend yield of 3.42%. Kellogg's relatively low P/E ratio and high dividend imply that the firm might appeal to Buffett's value oriented strategy.

Heinz HNZ, producer and marketer of ketchup and other food products, has been fluctuating over the past year between $48.17 and $55.00, reaching its current price of around $53.50. Heinz's stock has underperformed the S&P 500 by almost 10% year to date. Heinz recently sold its European brand Sonnen Bassermann, perhaps indicating that it is not averse to transfers of ownership.

Baker Hughes Oil-Field Services BHI is trading around $41.00 this morning, significantly lower than its 52-week high of $81.00, but near its 52-week low of $39.40. The firm's stock price declined more than 15% following negative earnings surprises in fiscal third and fourth quarters 2011. Last month, however, the company reported first quarter 2012 earnings of $0.86, representing a positive surprise of 7.50% over the analyst consensus estimate of $0.80. The firm's negative earnings surprises from last year may be leading to the stock trading at a discount.

American Electric Power Company AEP, a holding company for public utilities, is trading at near $38.50, placing it at a P/E of 11.62. This P/E ratio is lower than comparable companies Entergy Corporation ETR, which has a P/E ratio of 12.35, and The Southern Company SO, which has a P/E ratio of 17.78. All three companies have similar capital structures. American Electric Power Company's lower P/E ratio implies that firm might be attractive to value investors.

The $17 Billion to $20 Billion range also includes the following stocks, listed with their respective market capitalizations and industries:

Mkt Cap Short Name Industry

$ 19.9 b Chubb Corp-Property/Casualty Ins

$ 19.8 b Thermo Fisher Instruments-Scientific

$ 19.7 b Spectra Energy-Pipelines

$ 19.6 b Firstenergy C. Electric-Integrated

$ 19.2 b Phillips 66 Oil Comp-Integrated

$ 19.1 b Broadcom C. Electronic Compo-Semiconductors

$ 18.9 b Marathon Oil Oil Comp-Integrated

$ 18.8 b Equity Residenti REITS-Apartments

$ 18.8 b Pg&E Corp Electric-Integrated

$ 18.6 b Synthes Inc-Medical Products

$ 18.6 b Marsh & Mclennan-Insurance Brokers

$ 18.6 b Ecolab Inc-Chemicals-Specialty

$ 18.4 b Yahoo! Inc-Web Portals/ISP

$ 18.1 b Air Prods & Chem Chemicals-Diversified

$ 17.9 b Raytheon Co-Aerospace/Defense

$ 17.8 b Williams Partner-Pipelines

$ 17.8 b Discover Financi Finance-Credit Card

$ 17.4 b Hess Corp Oil Comp-Integrated

$ 17.4 b Cons Edison Inc Electric-Integrated

$ 17.3 b Lorillard Inc-Tobacco

$ 17.2 b Macy's Inc Retail-Regnl Dept Store

$ 17.2 b Schwab (Charles) Finance-Invest Bnkr/Brkr

$ 17.2 b Mead Johnson-Vitamins&Nutrition Prod

$ 17.2 b Cme Group Inc Finance-Other Services

$ 17.1 b Hcp Inc REITS-Health Care

Disclosure: At the time of this writing, I did not own shares of any companies mentioned in this post.